News Comment/COMENTARI AL DIA

Catalonia like France, Spain like Greece

Catalonia would enjoy the average eurozone income, richer than Italy and similar to France, while Spain would become impoverished like Greece. Below: The Eiffel Tower was built for the 1889 World’s Fair in Paris which followed the 1888 World’s Fair in Barcelona. Catalonia has not lost pace.

Credit Suisse have done their homework while know-nothing Madrid sticks to threats. The much more practical Swiss analysed what independent Catalonia would look like: richer than Italy and more like France while Spain would fall to Greek-style poverty with a similar bureaucratic and subsidised state. The Financial Times concludes that Europe is more interested in dynamic Catalonia than ruined Spain:

“It is easy to see why independence looks attractive for Catalonia and Scotland. Quite apart from a certain highhandedness from London and Madrid, more and more power is wielded from Brussels, while central governments offer little and demand austerity. An independent Catalonia would be richer but more indebted than Spain. Gross domestic product per head of €27,430 last year was ahead of Italy, while the rest of Spain at €22,284 was closer to Greece. Catalonia would have debt of 94% of GDP, far ahead of the rest of Spain’s 79%. But its taxes would no longer have to subsidise Spain. Scotland, meanwhile, would look much like the rest of the UK, at least until oil ran out. The worst case would be that the new countries were locked out of Europe by vengeful Spanish or English politicians, destroying their trade. Brussels is supporting warnings that EU membership would not be automatic, but it is hard to see Catalonia being excluded. Its economy is the same size as Greece, and kicking it out of the euro would be damaging. Spain and Britain could suffer too. Losing Catalonia’s industrial base would underline Spain’s weakness. Sterling from a disunited kingdom might lose value as a reserve currency and prompt focus on Britain’s budget deficit and debt. Raise questions about the UK’s haven status, and gilt yields of 1.8% are even harder to justify.”

(“Catalonia’s Choice,” by Credit Suisse Securities Research & Analytics, 19 November 2012 and “No need for bond investors to panic yet,” by James Mackintosh, Financial Times, 20 November 2012)